As Chávez Falters, Cuba Faces An Uncertain Future

By Lois Farrow Parshley

The health problems of its most important ally could force Cuba to finally build a better economy

Reuters

When President Hugo Chávez admitted
two weeks ago that he'd had a cancerous tumor removed in Havana,
Venezuelans weren't the only ones suddenly worried about their country's
political stability. Chávez and Fidel Castro are close friends, and
Cuba relies on Venezuela for more than $3.5 billion
in oil subsidies. With a population living on subsistence wages and an
economy sensitive to import prices, any dramatic change in Venezuelan
oil access could leave Cuba staggering -- and accelerate their
long-overdue process of economic liberalization.

Cuba is a
country accustomed to living in crisis. The Havana I saw on a January
2010 research trip was just starting to recover from hurricanes that had
caused $4 billion dollars
worth of damage two years earlier. I arrived on a 1968 Russian Yakovlev,
a Soviet hand-me-down with insulation hanging from the ceiling in
strips. My taxi from the airport, a red 1950 Bel Aire held together by
wire and duct tape, lurched north in the sticky heat. Holes left by
crumbling brick revealed full views of offices rooms. Through the thick
brown smog, people were going about their afternoon business. This being
Cuba, a friend told me, "People here are used to going with the flow."

Since
the devastating time known as the Special Period, following the collapse
of the Soviet Union -- when the average Cuban lost 10 pounds and the
protein-starved island collectively ate an entire species of anaconda
into extinction -- Cubans have perfected the art of "resolviendo."
Like many jokes that are only funny because they approach the truth,
people "resolve" -- the office worker who steals supplies to sell on the
black market, or the mechanic who makes a moto out of a soda bottle gas
tank -- when they practice the creative strategies that help them
survive. "The salary of an average Cuban is not enough to buy food for a
month," said a Cuban government official on Monday, who asked to remain
anonymous because, as she put it, "There can be confusion about who and
who is not an enemy of the Revolution, and there are many people in
Cuba who unfortunately can't tell the difference between one and the
other."

"Cubans can't afford to have a balanced diet, we just
eat what we can afford. So, I'm not talking about having a car, or
clothes, shoes, or even paying rent. We are talking here about
surviving," she said.

After Fidel quietly stepped down from
leadership in January of 2008, Raúl Castro loosened economic
restrictions and encouraged the slow burgeoning of a private sector,
granting 250,000 licenses
for new small businesses. The lucky few who can afford these licenses
now legally drive taxis, offer a room for tourists to spend the night,
or run a small restaurant out of their home. Although the government
still employs 80 percent of the work force, the sixth Communist Party Congress this April ratified
the first major adjustment of their Soviet-style economic model. While
change has been slow in coming -- Cubans still can't buy or sell homes
or cars, and businesses are still heavily regulated -- Raúl's regime is
attempting to bolster trade, devaluing the tourist currency by 8 percent and lowering bulk prices on Monday to simulate a whole-sale market.

But the transition to increased economic freedom has been difficult. Raúl originally announced the scheduled lay-offs
of a million government workers this winter, a decision he was
forced to postpone this spring due to Cuba's faltering economy.

This
restructuring could lead Cuba to greater self-reliance, something the
government has sought since the loss of Soviet sugar subsidies.
Venezuela currently provides Cuba more than 115,000 subsidized barrels
of oil a day, but Anya Landau French, the Director of the New American
Foundation's U.S.-Cuba Policy Initiative, said Cuba's relationship with
Venezuela is different than their past relationship with the Soviets.
Since the Special Period, Cuba has diversified its exports. She says if
Venezuela abruptly cut ties with Cuba, "Cuba would be staring a similar
moment in the face, but it wouldn't be quite as bad or as shocking.
They've been trying to wean off a single-benefactor system. The reform
process has just been going very slowly, in part because Raúl doesn't
want to make any mistakes, and in part because there are still
hardliners in the Cuban elite who are nervous about the dangers of
market capitalism."

Others disagree. A U.S. diplomatic cable
made public by WikiLeaks claimed Cuba's economy was struggling and could
be "insolvent" by 2011. Written by a U.S. diplomat in Havana after a
February 2010 breakfast with representatives from five of Cuba's largest
trading partners, the cable suggested
the Cuban government would face an economic collapse without Venezuelan
subsidies. The dire predictions were written before Raúl Castro
announced this spring's reforms, but many, including Paul Hare, the UK
ambassador to Cuba from 2001 to 2004, are worried that the cable might
still be a herald of things to come.

"Chávez has described Fidel
Castro as his 'father,'" Hare told me. "Venezuelan support to Cuba is
not a treaty between sovereign nations, but an understanding reached
between two political soul mates -- the equivalent of a secret
fraternity that is going to be difficult, if not impossible to replace."
A frightening repercussion of this personal relationship is that no
one, "apart from a very few people close to the Castros and Chávez knows
the [exact] size of Venezuelan subsidies."

If Chávez loses
power, Hare said, "It would be hard for the Chavista movement to remain
cohesive, even if his brother Adan steps in. Chávez has the personality
and track record of a populist leader -- there is no one who can readily
inherit that mantle." When I called Carlos Blanco, former Venezuelan
President of the Commission for State Reform, in Caracas, he said,
"Chávez didn't prepare a second layer of leaders within his own
movement, he has no clear successors. If there is any change, any reason
Chávez cannot continue, a new relationship with Cuba would have to be
agreed on."

In a world without Chávez, Cuba will still need a
sponsor. Its best hope may be to work out a preferential relationship
with Iran, already a partner in smaller trade agreements. But given the
power of the personal relationship between Chávez and Castro, any such
agreements would likely be less favorable than the current arrangements
with Venezuela. If the Spanish company Repsol's offshore drilling results in
2011 are productive, other non-Venezuelan companies (such as the
National Iranian Oil Company) might be interested in helping Cuba
develop offshore oil fields. But no foreign business can own majority control in any Cuban joint venture, which may discourage non-Chavista investors.

One
interesting result of all this is that nervousness over the future of
Venezuelan support will likely encourage Cuba's Old Guard to go along
with Raúl's economic reforms, and Cuba's economy may begin to open more
quickly. U.S. policymakers are considering ending the U.S. trade
embargo, which would bolster Cuba's private sector and remove much of
Cuba's need for an Iranian benefactor. Congress has long been divided on
the embargo. Some, like Representative Ileana Ros-Lehtinen (the House
Foreign Affairs Committee chairwoman, and a Florida Republican of
Cuban-American heritage) claim,
"It is reprehensible that the administration would continue to make it a
priority to advance ... exchanges with Cuba." Others, like former
Republican Senator Chuck Hagel believe blocking exports, "Does nothing to harm governments and the government leaders with which we disagree."

While
Venezuela's instability has created a nightmare for the Castros and
generated speculation around the world, most Cuban people are largely
unaware of the enormity of Venezuela's influence over their economy.
Generally, Cubans only get their news from the Granma Internacional,
Cuba's official newspaper, which is eight pages of text, half of which
are dedicated to reprinting various Revolutionary anniversaries.
Director Landau French predicted that, if Venezuela cut oil subsidies,
many Cubans might only hear of it when they start to experience power
brown outs and black outs.

The Cuban official I spoke to said
that even without knowing the full extent of Cuba's vulnerability, "Most
people are skeptical that we'll see a change from Raúl's reforms in the
economy, while others are hopeless." As she said, "You can't feel
stable financially as long as you earn 5 or 10 percent of what you
need."